Deficit Projection Up $17 Billion

July 15, 1987|By KEN CUMMINS, Washington Bureau

WASHINGTON -- The federal deficit next year will be $17 billion higher than previously projected even if President Reagan agrees to more than $19 billion in tax hikes called for in the budget approved by Congress last month, a revised congressional budget analysis revealed on Tuesday.

And if the current standoff continues between the president and Congress over tax increases and spending cuts, the study warned, deficits could climb to $181 billion in fiscal year 1988. That level would be $47 billion higher than the federal deficit projected in the $1 trillion budget approved by Congress on June 24.

Senate Budget Chairman Lawton Chiles, D-Fla., used the release of the higher deficit projections to renew his call for negotiations between Democratic congressional leaders and the White House to avoid a budget crisis during the next two months that could shut down the government.

``This is the time for cooperation,`` Chiles said. ``This is the time to find the combination of things that will eliminate the deficit once and for all.``

But James Miller, director of the federal Office of Management and Budget, again warned Chiles that Reagan will veto the tax increase called for by Congress despite the risk of much higher deficits.

The revised projections by the Congressional Budget Office and Miller, the president`s budget director, mean that both the budget passed by Congress and the spending plan proposed by Reagan earlier this year would fall far short of the targets set by the Gramm-Rudman-Hollings law. Those targets called for reducing the deficit to $108 billion by the end of next year.

Reagan has insisted that his proposed budget met the $108 billion deficit target. But Miller conceded on Tuesday that if the president`s budget had been enacted by Congress, the deficit still would be $150 billion next year.

However, Edward Gramlich, acting director of the CBO, told Chiles that ``if you could get it (the deficit) down to $150 billion, I think a whole lot of people would be pleasantly surprised.``

The showdown between Congress and the White House over tax hikes, defense spending, budget reforms and domestic spending cuts was expected this week on legislation to raise the current ceiling on the national debt to keep the government operating and to fund monthly Social Security and pension checks.

But Chiles now plans to offer a temporary extension of the debt ceiling until Sept. 30, the last day of the current fiscal year. This extension, if approved by the full Senate and the House, is expected to increase pressure on the White House to negotiate with Democrats in Congress on tax hikes and spending cuts beforehand to avoid a presidential veto on Sept. 30 that would shut down the government and cut off Social Security and pension benefits.

The government had been expected to reach its borrowing limit on Friday, but Miller said during his appearance before the Senate Budget Committee that it could continue to operate until the end of the month without an extension of the limit, at which time the ``drop dead`` point would be reached.

Chiles had planned to offer the two-month extension of the debt limit during Senate floor debate scheduled for today. But action on the debt limit extension may be put off until next week, a Senate Budget Committee staffer said late Tuesday.